The volume and price of the main fine chemical industry have risen sharply, and they are fully enjoying the dividends of price increases. In the context of stricter environmental protection, on the one hand, the penetration rate of environmentally friendly solvents will continue to increase, and demand is expected to continue to grow; on the other hand, the production capacity of “scattered pollution” enterprises may be shut down, the EIA and approval cycle for new construction projects may be lengthened, supply may contract, and the average annual price of some products will rise by more than 10% due to a mismatch between supply and demand, and the gross profit of the company's products has bottomed out and gradually increased. At present, the average capacity utilization rate of the company's main products is around 60%-70%. With the contraction of production capacity brought about by environmental protection and the increase in the penetration rate of environmentally friendly solvents, there is a lot of room for improvement in the capacity utilization rate, which is expected to rise rapidly to full production. With the raw materials unchanged, the average price of the product rises by 1,000 yuan/ton. According to the company's sales scale in recent years, the company's net profit is expected to increase by about 254 million yuan. Under the price increase cycle, a total production capacity of about 380,000 tons of methyl acetate, ditrihydroxymethyl, etc. was raised, all of which are expected to increase revenue of 3,039 million yuan and profit of 139 million yuan per year at the time of production.
Increase capital for sea-based new energy sources and enter new energy sources. The company participated in Haiji New Energy in 2016 and currently directly or indirectly holds a total of 30.86% of the shares. Haiji New Energy is an enterprise engaged in technology development, manufacturing and sales of lithium batteries and battery packs. It currently plans to invest 2 billion yuan to build a fully automatic lithium battery production line with an annual capacity of 2 billion watt-hours in two phases. The first phase of the project with an annual output of 1 billion watt-hours entered the installation and commissioning stage in May 2017. Sea-base plans a long-term production capacity of 6 billion watt-hours and is also supporting the construction of a battery pack PACK production line. The scheduled commissioning of new energy projects will become the company's new business growth point.
Subscribe to MTC's shares to allocate cobalt-lithium resources to open up the new energy industry chain. It is proposed to purchase 10 million shares of MTC Corporation. The company signed “Binding Trade Terms” with Metals Tech Limited (MTC) of Australia. It is proposed to subscribe for 10 million newly issued shares of MTC, with a subscription amount of 1.8 million Australian dollars (approximately RMB 9.34 million). MTC has 6 lithium mines+1 cobalt exploration rights. The total area of lithium prospecting rights is about 51,989 hectares. Among them, the Cancet lithium project is currently the flagship project of key exploration. It covers an area of about 9,584 hectares. The lithium oxide (Li2O) grade of surface sampled ores is between 1.19%-5.58%. The total area of cobalt exploration rights is approximately 3,122 hectares. This cooperation will provide resource reserves for the future development of the company's lithium battery industry, open up the upstream and downstream new energy industry chains, and provide strong resource support for expanding and strengthening the lithium industry.
Strong alliances to jointly develop graphene batteries. In June 2017, the company signed an agreement with Beijing Graphene Technology Research Institute (BGI) and Shenzhen Qianhai New Energy to jointly conduct research on graphene lithium battery cathode materials and graphene new principle battery technology. As a disruptive new material, graphene is in a critical period of transition from laboratories to industrialization. The combination of BGI's R&D advantages and the company's advanced production experience is expected to drive the technological transformation of graphene.
Profit forecast and rating: We forecast the company's EPS for 17-19 to be: $0.28, $0.48, and $0.72, respectively. The P/E corresponding to the closing price dynamics on November 29 was 35 times, 20 times, and 13 times, respectively. The company's production capacity continues to expand, and the volume and price of its main products are expected to rise sharply in the context of stricter environmental protection. At the same time, the company is also entering emerging fields such as new energy and graphene, laying the groundwork for future performance growth. Continue to give the company a “buy” rating.
Risk warning: the risk of falling product prices, the risk of falling lithium battery prices. The binding transaction terms are framework and intentional agreements, and there is uncertainty